Home Depot Horror Story

[Corduroy Frog]

Home Depot Salesman: We've loaded your lumber. You owe $1013.14.
Cecil Contractor: O.K. here's a check for $729.46.
Salesman: I'm sorry maybe there's a mistake. You owe $1013.14.
Cecil: No mistake. I got this letter from IRS, says I can't pay you full price.
Salesman: Whad'dya mean? Look, if you've got trouble with IRS, it's YOUR problem.
Cecil: Well not really. Two years ago I sent you a 1099 and they said wrong FEIN#.
Salesman: FEIN#????
Cecil: Yes, according to them you gave me a phony #, and now I've got to withhold 28%.
Salesman: You're full of it, mister. You need to talk to the manager or pull your truck around and let me unload it.
Cecil: Here's the letter right here! You wanna read it??
Salesman: I been working here 25 years, and never heard of any crap like this before.
Cecil: Me neither, supposed to help your healthcare I think...

[Snaggletooth]

Backup Withholding

...of course Cecil forgot to tell him that Home Depot will get credit for the $280+ that constitutes backup withholding. He can give Home Depot a 1099 at the end of the year, showing the $280+ as being withheld.

Home Depot can then staple a copy of this 1099 to the front of their 1120 to claim this credit as if they had remitted it themselves.

I'm sure if Cecil explains this, the store will then let him leave with his truck full of lumber.

[Gretel]

I am so glad that congress has over a year to fix this.

[AJsTax]

Fix it????

Fix what??? There is no incentive to "fix it" as you say. They need money bad and know that there is a huge underground economy that is not reported or taxed. There is only one way to find that money, require 1099s for everyone. Do not expect this to change much. Maybe exempt the large corps and utilities but I do not see any of the others being exempted.

Could I be wrong? of course, has happened once or twice. Only time will tell.
OK. want to find all of the unreported income? Get rid of the income tax and go to a Vat and national sales tax, then anyone that buys anything will have to pony up! Problem fixed. But wait!! that will make too much paperwork for businesses too.
So where do we go from here?? We have to pay for all this spending somehow and SOON.

[BHoffman]

A Novel Idea...

How about we cut spending instead of raising taxes?

My business clients are afraid to hire employees right now. They are the "Small Business" types, touted as the backbone of our Nation's financial stability. And they are afraid of what's next. And the actions of this administration and this Congress are hurting them.

Add a VAT and/or a National sales tax and/or Cap'n Trade and/or Card Check on top of what has already been "accomplished" and we are all going to see what a real economic crisis looks like.

[ChEAr$]

Beth......

CUT spending? Wow. What a novel idea. Wonder why our fear less leaders (both parties so this won't be political in nature! grin) haven't thought of that.

[AZ-Tax]

Witholdilng on 1099's to go into effect 2012?

Over the years, I rarely see a 1099 with any withholding. What I read about this new 1099 law that is scheduled to go into effect in 2012, I dont recall seeing anything about mandatory withholding on the form 1099 unless the recepient of the 1099 refuses to release their FEIN to the issuer. For some reason I dont think much of that will happen with larger businesses like Costco etc. especially if the law stands. Imagine you are at a business networking meeting and one of the members says "I did $1K of business with Costco and they refused to give me thier FEIN". How would Costco look to the other members? Over the years I have had small businuess tax clients who told me about not being to obtain a SS or EIN from a person or small business for which they purchased over $600 of products and/or services from and the tax new law didnt even go into effect.

It would seem to me those smaller businesses that refuse to keep good books, will be forced to keep good books and even hire a bookkeeper. I think we can all agree this is a good thing especially for you tax preparers also involved in bookkeeping. Potentially additional revenue. A couple of my small business tax clients who try to prepare their own books, yes I said try, on my recommendation will now hire a bookkeeper that I work with that has referred me quite a bite of tax clients. So there is at least one positive thing that came out of it.

[erchess]

Why 1099?

All you need to do is pay for everything your business uses with a credit or debit card and you'll never have to worry about giving anyone a 1099 or other report because the bank involved will take care of that for you.

From there it's only the simple step of having different cards and accounts for your business and personal expenses and even the interest is deductible.

[dtlee]

All you need to do is pay for everything your business uses with a credit or debit card and you'll never have to worry about giving anyone a 1099 or other report because the bank involved will take care of that for you.

From there it's only the simple step of having different cards and accounts for your business and personal expenses and even the interest is deductible.

Thanks for the reminder.

I just realized that this may also become a reason why those of us who only accept cash and checks may need to begin accepting other forms of payment too.

[BHoffman]

Thanks for the reminder.

I just realized that this may also become a reason why those of us who only accept cash and checks may need to begin accepting other forms of payment too.

And pay the credit card fees

[DaveO]

The exemption of payments by credit card will further complicate the matter. This requires the issuing business to keep separate records of cash/check vs. credit card payment. The number of errors on 1099's issued will be staggering. This will be followed by CP2000 notices based on the erroneous 1099's. I’m sure that any business issuing an incorrect 1099 will be more than happy to correct it. <sarcasm mode off> Looks like we might pick up more representation work along with the bookkeeping work.

[Snaggletoof]

Furor

Forget any changes resulting from people like you and me.

Now, if this 1099 requirement creates a big problem for corporate America, and lobbyists, they will listen.

In the late 80s, there was a bill passed which required withholding on bank interest. Imagine the furor on the part of the banks. They rallied their lobbyists in a hurry, and got the bill rescinded. Amazing how fast congress listened and reacted.

[erchess]

Furor

If very many large corporations such as Home Depot run into backup withholding by those who buy from them OR are concerned in advance this might happen then the law will change.

[joanmcq]

Hey, heads up! Large businesses already keep track of credit payments vs debit payments vs cash. How do you think they get paid by the credit companies? So should small businesses. Hell, I keep track of cash vs check payments. BFD.

[Black Bart]

Havin' your druthers

...Large businesses already keep track of credit payments vs debit payments vs cash... So should small businesses...

YOU say.

...Hell, I keep track of cash vs check payments...

Great! Keep it up. But...I don't want to...